Kodak bankruptcy ruling: Lessons for business and workers

More than 56,000 Kodak retirees got a rude jolt this week when a bankruptcy judge agreed with the company's request to terminate their benefits.

Perhaps the U.S. Supreme Court was right, after all. Companies are people, too. They are not immortal, their promises can be broken, and like all fallible folks, they will probably--wittingly or unwittingly--let you down numerous times in the course of your life and theirs. Moreover, they may not honor contracts to customers, suppliers, investors, their local communities, or even employees.

Richard Diehl just found out how fickle both man and enterprises can be. Diehl, who lives in Greece, N.Y., worked 36 years for the Eastman Kodak Co. and wrongly assumed he had earned from a grateful company "retiree medical, dental, life insurance and survivor income benefits." On Monday, Diehl and 56,000 other Kodak retirees got a rude jolt when a bankruptcy judge agreed with the company's request for the termination of those benefits, effective December 31.

Kodak in a pre-ruling statement said it could not "support continued payment of retiree benefit" even after initiating several cost-reduction actions that included laying off "nearly 4,000 employees this year and exiting or winding down several businesses and the proposed sale of our Personalized Imaging and Document businesses."

Kodak is clearly a troubled company, and its many problems are spilling over to all employees -- current and retired -- suppliers, customers, and shareholders. The once-mighty photographic equipment, printing, and imaging company is fading slowly into oblivion with sales dropping sharply each of the last four years, and net losses piling up in the hundreds of millions. The company's market value has dwindled to less than $60 million, and its shares now trade as a penny stock on the PINK exchange. Sadly, the company that gave millions worldwide the photography equipment to record their memorable moments today is lacking even a smidgen of its own previous glory.

I speak from experience at Nortel which did the same thing. There should be insurance on pensions. It would cost more but then it is guaranteed and regulated reported. Hopefully Kodak at least insured its LTD disability claimants because those people believed they had insurance as part of their benefits and in fact found it could disappear. It was really sad in Nortel's case as alot of cancer and injured people took a huge hit.

The Supreme court in the US may have ruled that Companies are People too, but without a soul to save or a body to incarcerate for their wrong doings, there is no incentive to play fair.
If I was to murder someone then I'd go to jail. If a company murders someone deliberately or due to negligence then the most they get is a slap on the (proverbial) wrist, a fine and told not to do it again ... Then it's back to business as usual.
A (corporation) person devoid of emotion is NOT a (human) person. No love, no hate & no empathy means in the end, the companies get the gold mine while the real people only get the shaft.

I recently visited the George Eastman House museum in Rochester.
The museum's portrayal of Kodak as a successful company was last updated in the 1990's, looking forward to "leading photography into the next 100 years".
Poignant.

In the US the problem of how to reduce health care costs has become a very hotly debated issue. But it really becomes the determining factor in allowing many people to lead happy and productive lives, and the ability of US based businesses to be competitive with the rest of the world. So we had better figure it out sooner rather than later.

In the UK the government funds healthcare through taxes. Not only would the situation these poor Kodak retirees have found themselves in never arise, it is also much much cheaper: UK healthcare spending per head is about 1/3 of that in the US, for a similar standard of care (our life expectancy is actually higher than yours) with the added bonus (for those with a heart) that it is available for all.

The PBGC (Pension Guaranty Benefit Corp) is deeply in the hole. That means it will either stop paying pensions of companies that failed, or, more likely, it will get bailed out by the feds, in which case our taxes will go up even more. The govt. has thus far refused to recognize this "off the books" loss. When Enron does this sort of thing, it's considered a felony.

I hope you're referring to this one line:
"Guarantees payment of certain benefits if a defined plan is terminated, through a federally chartered corporation, known as the Pension Benefit Guaranty Corporation."
Because other than that, in the US, unless you're a government employee, you don't get a taxpayer-funded retirement plan.
Unless you're talking about Social Security, but that's way below any 65 percent level for most workers.
ERISA establishes rules for company pension plans, but ERISA doesn't even require companies to have such plans.

65% of pension will likely be paid by taxpayers, right? But those old types of pensions are gone now. In spite of everyone complaining about big government, its the only entity that can still print money. The US had 4 decades of well funded pension plans, then the 1980's came along, and its been deregulation for business and banks, and social security and ERISA http://www.dol.gov/ebsa/faqs/faq_compliance_pension.html as the safety net for workers, neither close to the old promised pension levels.